Your most significant source of increased revenue in an uncertain market is right in front of your nose.
Your existing customers.
When budgets are tightening, as they are now, your current customers - especially happy ones - differ from net new customers as they already know you, your product, and your team.
First, let's take a step back and get a view of the current environment.
To give you an idea of the current state of B2B sales in the world of SaaS and what is coming down the pike, I'll share some insights I gleaned from a great Twitter thread by Patrick Campbell, Founder of ProfitWell.
Patrick analyzed over 23k SaaS businesses, and his findings were quite convincing.
Let's look at a few charts that Patrick shared.
This chart shows the level of Downgrades and Churn in the B2B SaaS space since 1/1/2020. As you can see, the level of churn is starting to increase rapidly.
The growth rate for B2B and B2C SaaS companies is also decreasing. So while B2B is still above water, B2C is not.
According to Patrick, "Recession's hit the consumer world first."
It's now well accepted that we are either currently in a recession or are headed towards one soon. As of yet, the scale of that recession is unknown, but you have probably already seen its impact on your funnel.
The economy's ebbs and flows are a natural byproduct of markets, and there's no reason to panic.
But, changing conditions do warrant a change in strategy.
Here's what Patrick had to say:
This is an opportunity to shore up the fundamentals.
Subscription growth is pretty basic:
Acquire a customer that's optimally monetized and sticks around for a long time.
You're likely focusing on one word - "Acquire." The rest of the sentence is pretty important, too...
So how do you focus on customers that generate more revenue and don't churn?
Look to your existing customers, the ones that are happy and growing - that's where you will have the most significant opportunity for revenue in this market.
Why should you start focusing on upselling existing customers?
There are a few reasons:
1. Trust
With more constrained budgets, there is now greater scrutiny put on vendors by buyers. This creates an extra layer to the sales process in which sellers must establish trust in the company and its offering.
That trust has already been built with an existing customer.
2. Time
Besides time saved on establishing trust, there's also the time saved on establishing value.
Whether it's an additional product or just more of what they originally purchased, your customer has already experienced the value; they know what they are getting.
3. LTV
As I'll discuss a bit further, you identify a potential upsell opportunity based on signals in how they are using your product. Generally, the signal you are looking for will tell you if that customer is growing.
The potential LTV is higher, as you have already seen that they are growing; if a company is using your product less, it might indicate that they are not doing well in this environment. And, conversely, if they are using it more - especially a product like ours - it means that they are doing better.
Below, I'll walk you through how we at RevOps are taking on this challenge, including the indicators we are tracking for potential opportunities and strategies to optimize our upselling process.
I'll also walk through how we build our upsell agreements within the RevOps platform.
Ready? Let's go!
Here at RevOps, our primary signal is active users; we monitor how many users a given customer account uses as an essential metric.
Our pricing model tends to include a committed amount of seats within the signed contract - sometimes, we also have a per-seat overage fee generally included.
Suppose we start seeing a customer trying to add more users than they've committed to or add permissions to existing users who might have a free license. In that case, that is an excellent signal for upsell opportunities.
Another metric we look at is the percentage of their seat licenses actively being used.
Our definition would be the amount of paid licenses being used to create deals out of the total amount of paid licenses in the contract.
When we see that number jump above 50%, that is usually a blinking green light for us to reach out and get an upsell discussion going.
The standard structure of our current pricing model charges customers based on users. To streamline the process of increasing the LTV of our existing customers, we've built a workflow focused on incentivizing customers to co-term their contracts.
If a customer has expanded beyond their initial user commitment, we want to incentivize them to renegotiate their contract to include additional licenses.
Those incentives are run through our Deal Desk to align all our teams - Sales, Product, Finance, and Support - on what we can offer to close the deal.
Whether it's pricing, payment terms, additional services, or something else, you want to build into your contract process to give them a reason and an incentive to pay more.
The last point is the way a product is designed. The RevOps Deal Desk platform is naturally more valuable as a company grows. As sales teams scale up and add more users, they inevitably get more value out of RevOps because it's a very team-centric platform.
What is Co-Terming?
Co-Terming is a strategy in which the original contract is amended using a secondary agreement that is "co-termed" with the additional items and the price is pro-rated to the end date of the original agreement.
Our upselling strategy includes the use of "co-terming" the original agreement, which significantly streamlines the process and reduces any friction in the process. This greatly increases our win-rate and speeds up the time to close.
Let's take a look at how we set up our co-term agreements in the RevOps Agreement Builder.
Easily Amend Agreements for Increased LTV
Increase customer lifetime value, decrease churn, and never leave money on the table with Upsells, Cross-sells, and Co-Termed Agreements
See RevOps for Yourself!
At RevOps, we like to leverage Co-Term agreements for our upsells. The benefit of a Co-Term is that it helps keep things more organized on the back end, more straightforward to bill for, and less prone to errors further down the road.
In addition, amending a co-term agreement to the original agreement means that the original Terms and Conditions that were agreed upon are referenced. Therefore the amendment does not need additional redlining.
When attaching a co-term to an agreement, the RevOps pricing calculator will factor in the pro-ration of the contract period to the total price.
The data is automatically synced into the CRM, ensuring complete data integrity.
In the current environment and the outlook on how things will play out in the coming months, it's essential to make your existing customers as profitable as possible.
You've already gone through that initial sales process; they trust you, have been using you, know who you are, and know what they're getting.
You have to be very open and looking for opportunities to sell them more of your solution, sell them additional products, build for them - whatever it takes to turn those happy customers into more profitable customers. Then, if you put in that work and they are satisfied with the results, they will increase their spending and expand their usage of your product.
